[Section 138 NI Act] Chairman/Director Of The Company Cannot Be Prosecuted Without Impleading The Company As Accused: MP HC [Read Order]

The Madhya Pradesh High Court has observed that a Chairman of the company can not be prosecuted under Section 138 of the Negotiable Instruments Act unless the company is impleaded as an accused.

A complaint was filed against the chairman of the company namely 'Well Built Industry India Ltd." after the cheque he had given under the capacity of chairman of the company got bounced. But the complainant had not impleaded the company as a party in the complaint case. Contending that the complainant also failed to specify his role of on behalf of the company, the accused approached the High Court by filing a petition under Section 482 of the Code of Criminal Procedure seeking to quash the proceedings against him.

Referring to the provision, Justice Rajendra Kumar Srivastava observed that the Section 141 of the Negotiable Instruments Act deals with the offences committed by the companies and say that if an offence is committed by a company under Section 138 of the Act, every person, at the time, the offence was committed, was in-charge and responsible to the company in the conduct of the business of the company, is liable along with the company to be proceeded against and punished accordingly. Further, it is provided that no person shall liable to be punished if he proved that an offence was not committed under his knowledge or he has exercised all due diligence to prevent the commission of such offence, the Court noted.

The court also referred to the decisions in S.M.S. Pharmaceuticals Lts. Vs. Neeta Bhalla and Another, reported in (2005) 8 SCC 89, K.K. Ahuja Vs. V.K.Vora reported in 2009 (10) SCC 48 National Small Industries Corpn. Ltd. Vs Harmeed Singh Paintal reported in (2010) 3 SCC 330 and allowed the petition filed by the accused. The court said:

In the present case, although, the respondent stated that the petitioner borrowed money from him on account of personal need of his business but looking to the fact that the respondent has accepted his business relation with the petitioner and the disputed cheque was given by the petitioner on behalf of the Company. A demand notice was served only on the petitioner/accused, there was no demand notice against company, therefore, without arraying the company as an accused in complaint case, the petitioner can not be prosecuted for the offence of Section 138 N.I. Act.  

Case no.: M.Cr.C No.735/2020

  Case name: Bhupendra Suryawanshi VS.Sai Traders

Coram: Justice Rajendra Kumar Srivastava 

Counsel: Advocates Ankit Saxena and Sonali Paroche

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